One of the challenges that a consumer faces in controlling their out-of-pocket health care costs is selecting an appropriate health insurance plan. Very often the most economical plan depends upon the particular personal situation of said given consumer. Recently in the United States, a number of new health insurance plans that cover prescription drug costs of persons qualifying for Medicare have become available. These are commonly referred to as “Medicare Part D” plans. These plans are offered by private insurers. The US government reimburses said private insurers for at least a portion of the costs of the plans.
According to the US government web site www.medicare.gov/MPDPF/Shared/Static/Resources.asp (last viewed 28 Sep. 2006):                “All Medicare drug plans will offer at least the standard level of coverage below. Medicare drug plans may design their plans differently as long as what their plan offers is, on average, at least as good as the standard coverage described below. Some plans may offer more coverage for higher premiums.        Standard Coverage (the minimum coverage drug plans must provide):        
If you join in 2006, for covered drugs you will pay                a monthly premium (varies depending on the plan you choose).        the first $250 per year for your prescriptions. This is called your “deductible.”        
After you pay the $250 deductible, here's how the costs work:                You pay 25% of your yearly drug costs from $250 to $2,250, and your plan pays the other 75% of these costs, then        You pay 100% of your $2,850 in drug costs, then        You pay 5% of your drug costs (or a small copayment) for the rest of the calendar year after you have spent $3,600 out-of-pocket.        
Your plan pays the rest.                Some plans may be called standard plans but may be designed so that the deductible is lower and the coinsurance is slightly higher. Other plans may charge copayments or set amounts instead of coinsurance.        In general, your out-of-pocket costs should work out to be about the same under these plan designs.”        One can think of the above described “Standard Plan” as being divided into 4 stages depending upon the level of benefits received by an insured. These stages are indicated in Table 1 below.        
TABLE 1Total YearlyTotal out-of-CommonAdjudicatedPocket Costs forNameStageYou PayPharmacy SpendInsuredfor StageStage 1100% <$250DeductibleStage 2 25% >$250Covered<$2250Stage 3100%>$2850Coverage GapStage 45% or a small >$3,600Catastrophiccopayment(e.g., $2, $5)
Thus, for example, if an insured had to fill a prescription for a drug that had an adjudicated price of $100, said insured might have an out-of-pocket cost of $100 if he or she were in Stage 1. That cost would drop to $25 when he or she entered into Stage 2. It would increase back to $100 when he or she entered Stage 3. It would drop all the way down to $5 when and if he or she entered Stage 4.
Insurance companies are free to design alternative benefits structures so long as on the average, they provide benefits at least as good as the Standard Plan. For example, an insurance company might provide higher benefits in Stage 3, but at a higher premium.
Furthermore, insurance companies may make the level of benefits for a drug in any given stage a function of the “tier” that the drug is categorized into. Exemplary tiers might include “generic,” “preferred brand,” “non-preferred brand,” and “specialty.” Lower tiers might have lower out-of-pocket costs for an insured and higher tiers might have higher out-of-pocket costs. A more complete description of said exemplary tiers can be found at the glossary link found on www.humana-medicare.com/medicare-plans-glossary.asp (last viewed 12 Oct., 2006). Said glossary is incorporated herein by reference.
The complexity of Medicare Part D plans combined with the number of different types of plans available from a given insurer makes it difficult for a prospective insured to make an informed decision as to which plan to enroll in. Thus there is a widely felt need for a means to present a comparison between the expected performances of different plans in a manner that can be widely understood by prospective insureds.